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Lukas > Econ (GDP) > Flashcards

Econ (GDP) Flashcards

1
Q

What is non-market production?

A

value individuals create for themselves

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2
Q

What does more market production lead to higher GDP?

A

More market production leads to higher GDP not because more value is being created, but because we are better able to count it

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3
Q

What is underground economy?

A

Black market, or income not reported to the government

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4
Q

What is not counted towards GDP?

A

Free goods/information are not counted towards GDP but adds value

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5
Q

How does leisure and comfort of workers in 1947 compare to that of workers in 2006?

A

In 1947, average workers worked 40 hrs a week. In 2006, average workers worked 33 hrs a week.

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6
Q

Is increasing GDP a good thing? Why or why not? Explain.

A

Because GDP only roughly correlates with standard of living, increasing GDP is not necessarily a good thing, vice versa

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7
Q

What does the Bureau of Labor do monthly?

A

They conduct a survey to determine employment data.

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8
Q

What are the three groups that the Bureau of Labor classify people into?

A

1) Employed
2) Unemployed
3) Out of labor force

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9
Q

What is the Bureau of Labor’s definition of employed?

A

People who have worked at least an hour for pay in the last week

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10
Q

What is the Bureau of Labor’s definition of unemployed?

A

People not presently working, but actively searching for work

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11
Q

What is the Bureau of Labor’s definition of “not in labor force” (aka ‘out of labor force’)?

A

People who are neither employed nor unemployed are not in the labor force. This category includes retired persons, students, those taking care of children or other family members, and others who are neither working nor seeking work.

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12
Q

What is the formula for calculating unemployement rate?

A

(unemployed/labor force) x 100

In other words, (unemployed/(employed + unemployed)) x 100.

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13
Q

What is the formula for calculating labor force?

A

employed + unemployed

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14
Q

What is the formula for calculating labor force participation rate?

A

(labor force/adult civilian population) x 100

In other words (employed + unemployed)/(out of labor force + unemployed + employed) x 100

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15
Q

What are three types of unemployment?

A

1) structural unemployment
2) frictional unemployment
3) cyclical unemployment

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16
Q

What is structural unemployment?

A

There is mismatch between the skills that workers in the economy can offer and the skills demanded of workers by employers (also known as the skills gap).

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17
Q

What are two causes of structural unemployment?

A

Jobs no longer exists because of

1) innovations
2) changes in preferences for goods

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18
Q

How do innovations cause jobs to no longer exist? Name two ways.

A

1) Machines replace jobs

2) Changes in production

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19
Q

What type of employment is considered the most painful kind of employment?

A

Structural unemployment. Painfulness depends on ability of people to adjust and apply skills to new jobs

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20
Q

Which type of unemployment is referred to as “creative destruction”

A

Structural unemployment

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21
Q

Who is Schumpeter?

A

Joseph Schumpeter is well known for his theory explaining the activities that lead to economic growth in capitalist economies

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22
Q

What is frictional unemployment?

A

Transaction costs + info problems means it takes time to find the right job. Takes employers time to find right person.

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23
Q

Which type of unemployment is associated with the phrase “skills gap”?

A

Structural unemployment

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24
Q

Which type of unemployment is associated with the phrase “search time?”

A

Frictional unemployment

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25
Q

Is frictional unemployment always present in an economy? Why or why not? Explain.

A

Frictional unemployment is always present in a market economy. It is the price of freedom to use skills.

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26
Q

What is cyclical unemployment?

A

Unemployment due to changes in health of macroeconomy.

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27
Q

Name five kind of changes in health a macroeconomy can experience.

A

1) swings in business cycle
2) depression
3) recession
4) low aggregate demands
5) boom

28
Q

What does underemployed mean? Name two characteristics.

A

A person who wants to work more hours OR is working in a field not realated to worker’s skills

29
Q

What problem exists with the way U.S. officials count underemployment?

A

U.S. officials counts underemployed as employed and this makes economy look better than it is

30
Q

What is inflation?

A

Decrease in value of money while there is an increase in prices

31
Q

What is purchasing power?

A

The amount of goods and services an individual can buy

32
Q

What is deflation?

A

greater purchasing power

33
Q

What are price indexes?

A

Ratios that tell us about changes in the price level over time

34
Q

What is consumer price index?

A

an index of the variation in prices paid by typical consumers for retail goods and other items

35
Q

Why does CPI tend to overstate inflation?

A

Because improvements in quality increases the prices of good, mistaken for inflation, and find subtitutes

36
Q

Why is expected inflation better than unexpected inflation?

A

Economics don’t consider expected inflation problems because they can plan ahead

37
Q

Who are better off when there is inflation? Name 3 groups.

A

debtors, firms, government

38
Q

Who is worse off when there is inflation?

A

savers

39
Q

Who is unaffected by inflation?

A

owners of tangible goods

40
Q

What is the formula for calculating inflation rate?

A

(this year’s price index - last year’s price index)/(last year’s price index) x 100

41
Q

What are two ways to calculate the inflation rate?

A

The inflation rate can be calculated from either the CPI or the GDP deflator

42
Q

What is debt to GDP ratio?

A

(gov. national debt)/(GDP) x 100

43
Q

What are the characteristics money? (six)

A

widely accepted, durable, recognizable quality, portable, limited in supply, divisible

44
Q

What are the functions of money?

A

.

45
Q

What is commodity money vs. fiat money?

A

.

46
Q

What is central vs. commercial banks?

A

.

47
Q

What is the purpose of the Federal Reserve, and why its “independence” important?

A

.

48
Q

What is fractional reserve banking?

A

.

49
Q

Why do changes in excess reserves lead to dramatic changes in the money supply?

A

.

50
Q

What are excess reserves?

A

.

51
Q

What are required reserves?

A

.

52
Q

Why are banks usually eager to lend excess reserves?

A

.

53
Q

What is the effect of an increase in the money supply (expansionary) on nominal and real interest rates? What is the effect of an decrease in the money supply (contractionary) on nominal and real interest rates?

A

.

54
Q

What is the effect of an increase in the money supply (expansionary) on aggregate demand, shown on an AD/SRAS graph? What is the effect of an decrease in the money supply (contractionary) on nominal and real interest rates?

A

.

55
Q

What is the effect of an increase in the money supply (expansionary) on inflation and output (look at the AD/SRAS graph) What is the effect of an decrease in the money supply (contractionary) on nominal and real interest rates?

A

.

56
Q

What is monetary policy

A

change the amount of excess reserves banks have

57
Q

How does open market operations work to change the money supply?

A

.

58
Q

How does required reserve ratio (RRR) work to change the money supply?

A

.

59
Q

How does discount rate work to change the money supply?

A

.

60
Q

Define economic growth

A

An increase in productive capabilities

61
Q

Explain the difference between long run economic growth and changes in business cycle

A

.

62
Q

Why does economic growth matter to the well-being, standard of living and quality of life of individuals?

A

.

63
Q

How do we measure economic growth?

A

.

64
Q

What are the fundamentals of economic growth?

A

.

65
Q

Why is increasing capital and productivity so important for economic growth?

A

.

66
Q

Show economic growth with a shift in SRAS, and then LRAS and PPF

A

.

67
Q

What is Austrian Business Cycle Theory?

A

.

Lukas (16 decks)

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